GSAT Stock Has 85% Upside Potential

If the biggest rallies happen during bear markets, then—once the stock market bottoms and investor optimism kicks in—overlooked 5G stocks like Globalstar, Inc. (NASDAQ:GSAT) could become some of the biggest small-cap tech stock winners.

Globalstar stock has been bucking the trend of the broader stock market sell-off. In 2021, GSAT stock ripped 254% higher. That torrid pace hasn’t continued in 2022, but that shouldn’t be a big surprise. Unprecedented economic headwinds are going to put the brakes on that kind of trajectory, no matter how great a company’s financial results are.

The S&P 500 and Nasdaq are firmly entrenched in bear markets, and the Dow Jones Industrial Average is flirting with a bear market. Globalstar stock, however, has been trouncing the broader market, going up by:

• 36% over the last three months
• 50% year-to-date
• Six percent year-over-year

Chart courtesy of StockCharts.com

Strong gains indeed, but Wall Street thinks GSAT stock is just getting started. Analysts have provided a 12-month share-price target for Globalstar, Inc. of $3.25, which points to potential upside of 87%.

Why the enthusiasm?

Even during the most aggressive interest rate hikes, stubbornly high inflation, and fears of a global recession, Globalstar, Inc. continues to ink new contracts, launch new products, and announce strong financial results.

Globalstar, Inc. Overview

Globalstar is a leading global provider of mobile low-Earth orbit satellite and Internet of Things (IoT) connectivity services and terrestrial spectrum. Its products include "SPOT" GPS messengers, next-generation IoT products and modules, and cloud-based telematics solutions. (Source: “Burkenroad Reports,” Globalstar, Inc., last accessed April 23, 2021.)

The company provides wireless communications service in areas not served by—or under-served by—terrestrial wireless and wireline networks and where terrestrial networks aren't operational due to natural or man-made disasters.

Globalstar, Inc. offers voice and data communication services over its network of in-orbit satellites and active ground stations, which it refers to collectively as the "Globalstar System."

The company's voice communication and data transmission services are available only to those with mobile or fixed devices designed to work on its network. Globalstar, Inc. currently has more than 770,000 subscribers.

The company's top revenue-generating markets in the U.S. and Canada are government, public safety, disaster relief, oil and gas, recreation, and personal telecommunications. In recent years, the portion of Globalstar’s customers using commercial IoT devices has increased significantly.

Globalstar, Inc.’s customers and partners include BP plc (NYSE:BP), the National Oceanic and Atmospheric Administration, Shell plc (NYSE:SHEL), the U.S. Air Force, the U.S Army, and the U.S. Department of Homeland Security.

Because the company’s client base is diverse, no single customer contributes more than 10% of Globalstar, Inc.’s revenue.

$327-Million Agreement for New Satellites

Globalstar, Inc.’s constellation of global satellites is about to get a lot bigger. In February, it entered a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation (aka MDA) and subcontractor Rocket Lab USA, Inc. (Source: “Globalstar Signs Contract With MDA for New Satellites,” Globalstar, Inc., February 24, 2022.)

Through the deal, Globalstar will acquire 17 new satellites to provide continuous satellite services.

The total contract price for the initial 17 satellites is $327.0 million, and the agreement includes the option for Globalstar to acquire nine additional satellites for $11.4 million each. The new satellites will be delivered and launched by the end of 2025.

In June, Globalstar, Inc. launched an existing on-ground spare satellite in partnership with SpaceX. This satellite is currently being used as an in-orbit spare to be raised to its operating altitude when and if needed.

Globalstar, Inc. Ended First Half of Year on High Note

For the second quarter ended June 30, Globalstar, Inc. announced that its revenue increased by 21% year-over-year to $6.5 million. This strong revenue growth mostly came from its various services. (Source: "Globalstar Announces Second Quarter 2022 Results," Globalstar, Inc., August 4, 2022.)

The company reported a second-quarter net loss of $26.8 million, or $0.01 per share, compared to a second-quarter 2021 net loss of $21.4 million, or $0.01 per share. Globalstar, Inc.'s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) went up by 49% year-over-year to a record $4.8 million.

The company ended the second quarter with cash and equivalents of $13.1 million.

David Kagan, Globalstar, Inc.'s CEO, commented in August, "The first half of 2022 has been very strong with financial and operational achievements that I expect will propel us into an even better second half...The past years of development and investment are bearing fruit, and I have never been more excited about our future." (Source: Ibid.)

Analyst Take

Globalstar, Inc. is a great tech stock that continues to crush the broader market. The only thing going against it is that it’s a penny stock, which scares most investors. Globalstar stock, however, is a penny stock in name only.

The company has a solid balance sheet, it has been gaining new customers, and it has been expanding its operations. Globalstar, Inc. recently reported excellent financial results with high revenue growth and record EBITDA.

With interest in the company’s services and terrestrial spectrum resources growing every quarter, management expects Globalstar's financial results in the second half of 2022 to be even better.